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The case of Phillips v RSPB & others serves as a reminder of the importance of checking the correct name of a registered charity and ensuring the wishes of the testator are clear in the event that the charity is an incorporated charity. Does the testator want his legacy to form part of the general assets of the company or be held on charitable trust?

The facts

Vera Spear died on 5 January 2007 leaving a 1997 Will in which she made a specific bequest of her pet parrot and then the residue of her estate to be divided equally between four charities one of which was said to be ‘ the Owl Sanctuary, Crow, Ringwood, Hampshire’.

The value of the deceased’s estate was approximately £260,000 and each charity’s share of residue was of the order of £65,000. Unfortunately, at her death there was no charity called ‘Owl Sanctuary’ at Ringwood but it was agreed between the parties that the intention of the testator was to benefit the New Forest Owl Sanctuary Ltd. (NFOS).

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NFOS was a registered charity which operated at the site in Crow near Ringwood. It had formerly been run by a Mr Bruce Berry but the NFOS ceased to operate following allegations of cruelty highlighted by a BBC television programme aired in June 2003. Mr Berry was one of two trustees persuaded to stay in office following a Charity Commission investigation to oversee an orderly closure of NFOS’s affairs. This proved difficult because Mr Berry transferred the lease of the site to a Mr Talbot who then refused to allow access to the birds and other chattels still at the site.

Sadly, not all the birds found secure nesting places, some were acquired by Mr Talbot, others went to the North Wales Bird Trust (NWBT) and some were left with Mr Berry; a few were lost. Once the remaining cash at NFOS had gone in legal fees it was removed from the Charity Commission Register on 17 August 2006 and the company was dissolved and removed from the register of companies on 6 February 2007, shortly after Vera died.

The NWBT argued that it was entitled to take the legacy as a registered charity which is a successor to NFOS.

The Attorney General took a neutral position on the wording of the successor provision in the Will but if it failed then the gift may nevertheless be saved for charity if it was for NFOS’s general purposes or was a gift to NFOS absolutely on the basis of the cy-pres doctrine.

If the gift failed altogether it would fall to be divided under the intestacy rules between 16 relatives of the deceased.

The wording of clause 6 of Vera’s Will said her trustees were to “divide the same between the RSPCA, the PDSA, Monkey World Limited and The Owl Sanctuary Crow Ringwood Hampshire for their respective general purposes in equal shares absolutely.”

In clause 7 of her Will Vera said that “…if before my death (or after my death but before my trustees have given effect to the gift) any charitable or other body to which a gift is made by this Will … has changed its name or amalgamated with any other body or transferred all its assets then my trustees shall give effect to the gift as if it were a gift to the body in its changed name or to the body which results from the amalgamation or the body to which the assets have been transferred.”

The arguments

Counsel for NWBT argued that it was the only registered charity to receive assets from NFOS and this was only after all disputes with Mr Talbot’s company and one of the trustees had been resolved and it no longer had any realisable assets.

The judge did not think the argument held water as on a proper construction of clause 7 there would need to be activities carried on by one body which were now carried on by a successor body. Looking at the whole of the process by which NFOS was wound up (it took three years) it could not be said that it assets were transferred to NWBT only some of the assets were delivered to NWBT but title to vehicles and equipment in Hampshire never passed and not all of the birds were transferred to NWBT. Clause 7 did not therefore apply to transfer the legacy to NWBT.

The Attorney General’s questions to determine whether the gift could be preserved for charity were:

Is the gift to be construed as a gift for charitable purposes of NFOS, rather to it absolutely? If so, the property would be impressed with a charitable purpose trust to which the court could effect by way of a scheme.

The Judge referred to the case of Re ARMS (Multiple Sclerosis Research) Ltd. [1997] 1 BCLC 157 where gifts were made to a charitable company which was in liquidation by the time they came to be paid. The question there was, like here, whether they formed part of the general assets of the company and therefore should be paid to the liquidator in that case or whether they were subject to charitable trusts. In that case it was held that a gift to a company for its general purposes formed part of its general assets and was not held by it on trust. So too in this case it was held not to be held as part of a separate trust.

If the gift to NFOS was absolute then the court may apply the cy-pres doctrine.

A gift to a corporation lapses if it ceases to exist by the date of the testator’s death. NFOS may have effectively run itself down but the company was not formally dissolved until a few weeks after Vera’s death and therefore the gift did not lapse.

If it was neither for NFOS’s general charitable purposes nor for NFOS absolutely then it failed as a gift and there would be a partial intestacy.

Since the gift was said to be absolute and the company had not been dissolved at the date of the deceased’s death there was no partial intestacy.

The decision

The Judge decided that the court could direct that the funds be used in a manner as close as possible to that which the deceased intended which in this case would be to direct that the gift be given to NWBT in view of its similarity of purpose.

Practice points

Many small charities to-day are incorporated to protect the charities trustees by giving them limited liability. Where a client wants to benefit an incorporated charity consider:

What is to happen if the charity still existed on death but was in the process of liquidation? It is unlikely that the testator would want the company’s creditors to benefit. Instead, the testator would surely wish the gift to lapse even though the company technically still existed. Why not include either a substitution in the event that the charity has entered into liquidation or arrangements with its creditors or allow the gift to lapse in those circumstances?

What is to happen in the event that the charity ceases to exist –i.e. the gift is absolute but the charity closed before the testator died – a substitution clause will be required?

Tel: 01962 776442 Email: gill.steel@lawskills.co.ukGill has worked as a consultant to the legal profession for over 21 years
Gill is a compelling seminar and conference speaker both in-house and at public events with a strong gift for making Wills, Probate, Trusts, Tax and Elderly Client topics practical, engaging, authoritative and informative.
She is developing e-learning designs as part of a blend of learning techniques to aid the profession as it moves from a course mindset to more flexible learning.